Tesla Delays Gigafactory Construction - Analyst Blog

Tesla Motors, Inc. TSLA recently held the 2014 Annual Stockholder Meeting, wherein it discussed its plans for the ‘Gigafactory,' sales expectation, superchargers and the Model X. Further, Elon Musk confirmed that he will continue as the CEO of the company for at least the next 4 to 5 years.

Tesla said that it will begin construction of the Gigafactory and finalize the place for it by the end of this year. The company was earlier tentatively planning to start the construction work in June, as disclosed in the earnings conference call. The automaker also disclosed that it might be starting the Gigafactory construction on three sites instead of two.

Tesla plans to construct the Gigafactory to produce lithium-ion batteries for its cars in collaboration with various partners. The automaker expects the factory to provide economies of scale and reduce production costs based on innovative manufacturing techniques, reduced logistic wastes, optimization of co-located processes and lower overhead costs.

By 2020, Tesla expects the annual lithium-ion battery production of the Gigafactory to exceed the global production in 2013. The factory will produce enough battery packs to allow Tesla to build around 500,000 electric cars by 2020. Also, by the end of the first year of manufacture of the mass market vehicle, the per kWh cost of production of battery packs is expected to be reduced by over 30%.

Panasonic Corp. PCRFY is expected to be the sole manufacturer of lithium-ion battery cells in the Gigafactory. Tesla expects the deal with Panasonic, to be favorable for the company. Tesla's third-generation car will be equipped with batteries which will be produced in the Gigafactory. These batteries are expected to decrease the cost of power system of the vehicle.

Next, Tesla is very ambitious about its sales figures. The automaker recorded sales of 22,500 cars last year and expects to sell 35,000 vehicles this year. The rise in sales is based on rising demand and favorable impacts of improving mileage per charge. Tesla also wants to increase the supply of the Model S sedan to meet demands in China. In addition, the automaker is working on expanding the number of high-speed supercharging stations, particularly in China.

Tesla currently carries a Zacks Rank #4 (Sell). Some better-ranked stocks worth considering in the same industry are Gentherm Inc. THRM and Tower International, Inc. TOWR. Both Gentherm and Tower International carry a Zacks Rank #1 (Strong Buy).